For What It’s Worth: My Take on Last Week’s Supply Chain & Logistics News (May 30, 2018)

Every Friday on Talking Logistics, I share a list of supply chain and logistics news that caught my attention that week, along with some brief commentary and analysis. For what it’s worth, here’s my take on some of the news that made the headlines last week.

Amazon Feeling the Headache of E-Commerce Returns

As I wrote this past January, e-commerce returns are a major headache for retailers (holiday e-commerce returns were expected to reach $32 billion this past year). As much as retailers are struggling to keep up with the rapid growth of e-commerce and fulfilling online orders on time and profitably, they’re struggling even more with handling returns.

Even Amazon is feeling the pain. As reported by Khadeeja Safdar and Laura Stevens in the Wall Street Journal last week, Amazon has started to “ban shoppers from the site for infractions such as returning too many items.” Here’s an excerpt from the article:

Amazon has cultivated an image as a customer-friendly company in part by making it easy for shoppers to send back items they don’t want. The site’s lax return policies have conditioned consumers to expect the same treatment from other retailers, adding to pressure on brick-and-mortar chains. But shoppers are finding out there are some customers Amazon has determined aren’t worth keeping.

Dozens of people have complained on Twitter, Facebook and other online forums that Amazon closed their accounts without warning or explanation. Amazon doesn’t tell customers in its return policy that their return behavior can get them banned, but the company says in its conditions of use that it reserves the right to terminate accounts in its sole discretion. Some people said they have also received email alerts from Amazon about their return activity.

Just like there is no such thing as free shipping, there is no such thing as free returns. Banning someone from shopping at Amazon altogether for excessive returns might be an extreme response, but it’s clear that the pendulum has swung too far in what consumers have come to expect and a reset is required. I’ll just repeat what I said back in January:

The bottom line is that product returns is yet another example of how “the way we’ve always done it” is just not going to cut it any more. Retailers have been so focused over the past few years on omni-channel retail, on the sell side of e-commerce, that they have virtually ignored (underinvested in) their ability to effectively manage product returns, the hangover headache of e-commerce.

Well, that headache is turning into a killer migraine, and unless retailers start innovating this end of the e-commerce process, they will see whatever gains they make on the sell side disappear on the returns side.

Blockchain: The Cooks in the Kitchen Are Starting to Disagree

As I highlighted recently in Blockchain Will Solve, Save, Cure Everything, lack of standards is one of the hurdles that the industry must overcome to drive the adoption of blockchain technology in supply chain management.

The good news is that that there is a lot of work going on in this area, such as the Blockchain in Transport Alliance (BiTA), which already has several hundred companies in the transportation and logistics industry participating. And just last week, the Blockchain in Supply Chain Alliance (BiSCA) was announced, with a focus on procurement, planning, warehousing, and transportation processes.

As history has shown, however, developing industry standards is a long and often painful process, and the more cooks in the kitchen, the longer and more painful the process becomes.

Take a look at what’s happening in the ocean freight industry. Earlier this year, Maersk and IBM formed a joint venture to “digitize the global supply chain from end-to-end,” creating a “shipping information pipeline [that] will provide end-to-end supply chain visibility to enable all actors involved in managing a supply chain to securely and seamlessly exchange information about shipment events in real time.”

However, Maersk’s leading competitors, German Hapag-Lloyd and France’s CMA CGM, aren’t jumping on the Maersk-IBM bandwagon. As reported by ShippingWatch last week:

According to [Hapag-Lloyd CEO Rolf Habben Jansen] and Peter Wolf, general manager of CMA CGM in Germany, the basis prerequisite for a joint digital platform platform in the sector, one which the biggest liner companies will be part of, is to ensure a common standard. “Technically the solution (by Maersk and IBM) could be a good platform, but it will require a governance that makes it an industry platform and not just a platform for Maersk and IBM. And this is the weakness we’re currently seeing in many of these initiatives, as each individual project claims to offer an industry platform that they themselves control. This is self-contradictory,” said Jansen at the [Global Liner Shipping Conference].

The irony, however, is that once standards are established, it wouldn’t surprise me if each company and industry will start bastardizing them, as we have seen with other “standards” such as electronic data interchange (EDI) where companies proceeded to add and rearrange fields, thus contributing to the integration and data quality challenges that plague supply chains today.

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Comments

  1. What I boiled this story down to is that Amazon is not doing that great of a job dealing with returns, they have no understanding of customer service, and want to work with customers who will keep their Perfect Order Index at 99.9% or better. That’s called gaming.

    For fraud and abuse I understand why Amazon wants to weed them out. I totally applaud them for taking action to combat abuse. Is it really abuse, though, when Amazon wants you to shop and buy products and inevitably some of those may not be the right size or fit or color forcing the return? And Amazon has worked hard to build the “free shipping/returns’ perception into their Amazon Prime membership. If Amazon wants the go-to retailer, then they should act like one with returns.

    And how is a retailer to know how they are performing unless they receive feedback from the customer/end user? If I ship 1000 orders today, how will I know if I’m successful? Current software and technology does not report back to the warehouse, supply chain or company that the customer is happy or sad with their order. By knowing what errors have been made, I can take action to correct those errors when the customer reports the issue.

    Personally, I’ve had a number of issues with products I purchased from Amazon (all of which were Amazon Prime marked) that arrived damaged, 3 to 4 days late after paying extra for 1 day shipping, etc. In each case Amazon did not make me whole for the loss. They either punted or provided something I could not use (e.g. $10 Amazon Bucks – only can be used for Amazon products).

    As a end user, I make choices based on previous experience working with Amazon and only use them for difficult, hard to find items that I do not immediately need. The hassle to return something damage or incorrectly shipped to me is too difficult. It’s much easier to deal with a brick and mortar retailer around the corner from now, who says “Hi Joe!” when I enter the store.

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